Monday, September 8, 2008

Fed Takeover: What It Means For Americans

What the Takeover Means for Americans, according to Hank Paulson's Statement on Fan & Fred takeover:

"And let me make clear what today's actions mean for Americans and their families. Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe. This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation. That is why we have taken these actions today."

What the Takeover Means to Americans: Some thoughts from the finance/economy gurus at CalculatedRISK:

"For housing, this doesn't change anything. Housing fundamentals remain the same: excess supply (especially distressed supply), tighter lending standards, and prices are still too high compared to incomes and rents. The possible slightly lower mortgage rates are almost inconsequential compared to supply and price issues.

And the economy is still in recession that will linger for some time."

Additionally, the NYTimes' Ron Leiber weighs in on mortgage rates, house prices, new deals on old mortgages, new rules for new mortgages.

Time will tell....


Jason said...

IMMEDIATE EFFECT - fixed mortgage rates are 1/4% better today compared to Friday. 30yr fixed is now 5.875%. Courtesy of the US Treasury.

Mark Zandi of Moody's predicts we'll see 30yr fixed rates around 5.5%.

Real C'ville - The Bubble Blog said...

Need to inject $ into the mortgage system, other than that of the federal government?

Drop mortgage rates.

So now not only are *new* mortgages more affordable, but everybody who is fixed above 6 will want to refi, even if they're not in "trouble." Lots of fees generated by this.

But a 5.5% mortgage on a house that is overvalued with a bubble price is *still* too expensive.

A good mortgage rate plus a lowball offer--now we're talking.

There's currently more than 14 months of house inventory in our area.

And for anybody who follows Mark Zandi...he's been "right" all along. It may take a little while to get to 5.5%...but we'll no doubt get there.

Plapdip said...

Re-fi for everybody?

The Ponzi Scheme, Part 2.

Jason said...

I agree, refis will certainly spike, but I doubt (stepping out on a ledge here) significantly. I expect that FNMA/FHLMC will continue to ratchet up their guidelines, dampening some of the effects of reduced rates.

I think what's being lost in all the Fannie/Freddie news is the condition of FHA. As of August '08, they had a 40% market share (compared to 3.5% in 2004!). NYT article:

I seriously doubt that the bailouts are over.

Anonymous said...

The FDIC may need its own bailout, according to head Sheila Bair. NY Times article from Aug 27: